Norway still risks becoming too dependent on oil money - central bank

Reuters Staff

2 Min Read

OSLO (Reuters) - Norway runs the risk of becoming too dependent on money from its $900 billion (£721 billion) sovereign wealth fund even though the government on Thursday recommended a tightening of spending, the central bank governor said.

Prime Minister Erna Solberg and Finance Minister Siv Jensen said spending in a normal year should be limited to three percent of the fund, down from the current four-percent rule, to take into account lower expected future returns.

Central bank governor Oeystein Olsen said changing the fiscal rule made sense, but argued in a speech that Norway should not allow spending to increase from the current eight percent of non-oil gross domestic product.

“A further escalation of spending from today’s levels would be a daring move, even if the fund itself were to grow,” Olsen said.

“Fiscal policy must be decoupled from financial assets subject to considerable volatility ... The period of rising government spending of petroleum revenues should now be over.”

Asked if this would mean scrapping the percentage-based spending rule, Olsen said “yes”.

“That’s a reasonable interpretation. The rule is no longer as appropriate as it once was in guiding long-term policy,” he told Reuters.